1. What is Inventory Days?

Inventory Days, also known as Days Inventory Outstanding (DIO), measures the average number of days a company holds its inventory before selling it. It indicates inventory management efficiency and liquidity.

2. How Does the Calculator Work?

The calculator uses the Inventory Days formula:

Where:

• \( \text{Inventory Turnover} \) — Number of times inventory is sold and replaced in a year

Explanation: This formula converts the inventory turnover ratio into the average number of days inventory remains in stock.

3. Importance of Inventory Days

Details: Monitoring inventory days helps businesses optimize stock levels, reduce holding costs, improve cash flow, and identify potential inventory management issues.

4. Using the Calculator

Tips: Enter the inventory turnover ratio (times per year). The value must be greater than zero for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good inventory days number?
A: It varies by industry, but generally lower numbers indicate better inventory management. Compare with industry averages for context.

Q2: How is inventory turnover calculated?
A: Inventory Turnover = Cost of Goods Sold / Average Inventory

Q3: Why use 365 days in the formula?
A: 365 represents the number of days in a year, providing a standardized annual basis for comparison.

Q4: What does a high inventory days value indicate?
A: High values may indicate overstocking, slow-moving inventory, or potential obsolescence issues.

Q5: Can inventory days be too low?
A: Extremely low values might indicate stockouts and lost sales opportunities, suggesting inadequate inventory levels.